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Common Ground Between Free-Traders and Environmentalists

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Author Info

  • Zhao, Jinhua
  • Karp, Larry
  • Sacheti, Sandeep

Abstract

We use a North-South model with property right differences and resource dynamics to study the effects of trade on resource use and welfare. Autarky is likely to Pareto-dominate free trade in the long run when the environment is quite fragile, and the result is reversed when the environment is quite resilient. Trade may cause an environmentally poor country to ‘drag down’ its richer trading partner, or cause both countries to degrade their stocks when these would be preserved under autarky. Alternatively, trade may enable the environmentally richer country to ‘pull up’ its partner or cause both countries to preserve their stocks when these would be degraded under autarky. These results rationalize the positions of environmentalists and free-traders. The direction of trade may change over time, but in steady states it is either inefficient or indeterminate. In the former case a switch to autarky would increase global welfare.

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Bibliographic Info

Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 5138.

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Date of creation: 01 Aug 2001
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Publication status: Published in International Economic Review, August 2001, vol. 43 no. 2, pp. 617-647
Handle: RePEc:isu:genres:5138

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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
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Web page: http://www.econ.iastate.edu
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Cited by:
  1. Akihiho Yanase, 2013. "Free trade may save a renewable resource from exhaustion," Economics Bulletin, AccessEcon, vol. 33(1), pages 226-233.
  2. Ruta, Michele & Venables, Anthony J, 2012. "International trade in natural resources: Practice and policy," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8903, C.E.P.R. Discussion Papers.
  3. Karp, Larry S. & Zhao, Jinhua & Sacheti, Sandeep, 2000. "The long-run effects of environmental reform in open economies," CUDARE Working Paper Series, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy 818, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
  4. Cremer, Helmuth & Gahvari, Firouz, 2006. "Which border taxes? Origin and destination regimes with fiscal competition in output and emission taxes," Journal of Public Economics, Elsevier, Elsevier, vol. 90(10-11), pages 2121-2142, November.
  5. Gulati, Sumeet, 2001. "The Effects of Choosing Free Trade on Endogenous Environmental Regulation and Welfare: A Model of Common Agency Government," 2001 Annual meeting, August 5-8, Chicago, IL, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) 20449, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  6. Richter, Andries & van Soest, Daan & Grasman, Johan, 2013. "Contagious cooperation, temptation, and ecosystem collapse," Journal of Environmental Economics and Management, Elsevier, vol. 66(1), pages 141-158.
  7. Eggert, Håkan & Greaker, Mads, 2009. "Effects of Global Fisheries on Developing Countries Possibilities for Income and Threat of Depletion," Working Papers in Economics, University of Gothenburg, Department of Economics 393, University of Gothenburg, Department of Economics.
  8. Karp, Larry, 2005. "Property rights, mobile capital, and comparative advantage," Journal of Development Economics, Elsevier, Elsevier, vol. 77(2), pages 367-387, August.
  9. Zaman, Rubaiya, 2012. "CO2 Emissions, Trade Openness and GDP Percapita : Bangladesh Perspective," MPRA Paper 48515, University Library of Munich, Germany.
  10. Regibeau Pierre M & Gallegos Alberto, 2004. "Managed Trade, Trade Liberalisation and Local Pollution," The B.E. Journal of Economic Analysis & Policy, De Gruyter, De Gruyter, vol. 3(2), pages 1-26, November.
  11. Anriquez, Gustavo, 2002. "Trade And The Environment: An Economic Literature Survey," Working Papers, University of Maryland, Department of Agricultural and Resource Economics 28598, University of Maryland, Department of Agricultural and Resource Economics.
  12. Muthukumara Mani & Per G. Fredriksson, 2002. "The Rule of Law and the Pattern of Environment Protection," IMF Working Papers 02/49, International Monetary Fund.

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